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Social Security money to run out sooner than thought

KAREN BLEIER/AFP/Getty Images

Attendees applaud speakers during a rally on Social Security and Medicare at the Dirksen Senate Building November 17, 2011 in Washington, D.C. Recent data shows that the Social Security Trust Fund will now run out of money sooner than expected.

Jeremy Hobson: And we'll start with a concerning report from the trustees who oversee the nation's two largest entitlement programs. The Social Security Trust Fund will run out of money three years earlier than previously thought in 2033. As for Medicare, that's still on track to run out of cash in 2024.

Olivia Mitchell is executive director of the Pension Research Council at the Wharton School. She's with us now from Philadelphia with more. Good morning.

Olivia Mitchell: Good morning.

Hobson: Well how concerning is this report for someone like you who follows this issue very closely?

Mitchell: It's concerning only in the sense that this underscores the gravity of the problem that we face. The last time something serious was done to support Social Security was in 1983. And we're long past due, and it's time to get started.

Hobson: Well some of the proposals to shore up these programs are things like raising the age of eligibility again; cutting benefits. How soon would that kind of thing have to happen to keep these programs solvent?

Mitchell: If you take a narrow view, what you understand is that there's a trust fund, which is supposed to be the piggy bank whereby if the funds run short, the Social Security Administration can go and claim these bonds. But if you take the broad view -- which I do take -- you have to understand that the money actually has been spent. And so what it means is we'll either have to raise taxes, or cut expenditures, or issue more debt to be able to pay the scheduled benefits.

Hobson: Now, you seem rather calm about all of this. Do you assume that eventually, lawmakers will just do what has to be done?

Mitchell: I think if lawmakers don't raise revenue somehow, benefits will have to be cut by about a third. And for many people who rely on Social Security heavily, this will be a big challenge.

Hobson: Olivia Mitchell is executive director of the Pension Research Council at the Wharton School at the University of Pennsylvania. Thanks so much.